Growing Pains in Democratizing Investing
by Charles Cheng, CFA
The trading and global media frenzy surrounding the Gamestop short squeeze in January is worth revisiting now that the dust has settled, as it highlights the newfound power of retail investors as well as the risks involved in this new environment.
Gamestop (GME) share price
Source: Google Finance
To recap, users of an online message board r/wallstreetbets banded together to engineer a short squeeze of the shares of Gamestop (GME), a struggling US listed company that had been shorted by hedge funds and other traders to over 140% of its trading float. By buying shares and call options, they hoped to force the short sellers to cover their positions and thus drive the stock higher. The stock closed over 50% higher on Jan 22 at USD$65, after having already doubled since the beginning of the year, capturing media attention. Continued rises prompted widely followed public figures like Elon Musk to post about the stock on social media, drawing more and more investors to push the price close to USD$500 on Jan 28th.
回顧一下，在線留言板r / wallstreetbets的用戶團結起來，一起軋空Gametop (GME) 的股票。 Gamestop是一家陷入困境的美國上市公司，已被對沖基金和其他交易員賣空了其140％以上的股票放空量。 留言板中的用戶希望通過購買股票和看漲期權 (call option) 來迫使賣空者補倉，從而推高股價。 該股股價自今年年初以來已經翻番。 並在1月22日漲幅超過50％，收盤價65美元，從而引起媒體的關注。 持續的上漲促使像埃隆·馬斯克 (Elon Musk) 這樣的公眾人物在社交媒體上發佈了有關該股票的信息，此舉吸引了越來越多的投資者，使其股價在1月28日逼近500美元。
The mania spread to other stocks of other struggling companies like AMC Entertainment and Blackberry and to various highly shorted stocks. Even unrelated companies in countries around the world like GME Resources in Australia surged. Eventually, shares of these companies fell back down to Earth and Gamestop was trading at just USD$40 on February 19th. While there were major controversies regarding major retail brokers being forced to halt trading on the stocks near the peak, there are also two lessons from this episode that both new and experienced investors should consider.
這波狂熱蔓延到其他陷入困境的公司的其他股票，例如AMC Entertainment和Blackberry，以及各種高度做空的股票。 甚至像澳大利亞的GME Resources這樣在世界各地不相關的公司 (但股名類似的) 股價也出現了飆升。 最終，這些公司的股票回跌落地，而Gamestop在2月19日的交易價格僅為40美元。 儘管此事件衍生了重大爭議 — 零售經紀人被迫在高峰期停止股票交易，但從這一事件中無論是新手還是有經驗的投資者都應該考慮以下兩個教訓。
Post on r/wallstreetbets
First, is that regardless of your conviction in the fundamental value of a company, all bets are off when retail and short-term investors become drawn to a stock or other asset, particularly when social media is involved and as monetary policy remains loose. This has always been true to some extent, but now just magnified to a completely new degree. If a stock can go up 300% in a few days, it can possibly go up 3000% as well considering that it’s not tethered to any notion of value, which makes it extremely dangerous to short any company.
首先，不管您對公司的基本價值有何信念，當散戶和短期投資者被股票或其他資產吸引時，所有的預測都會失靈，特別是在涉及社交媒體且貨幣政策仍然寬鬆的情況下。 在某種程度上，這一直是這樣的，但現在又被放大到一個全新的程度。 如果某支股票幾天之內可以上漲300％，考慮到它不受任何價值觀念的束縛，那麼它也可能上漲3000％，這使得賣空任何股票都非常危險。
According to Credit Suisse, the share of retail activity in trading has doubled to 30% since the start of 2020, all while overall trading volumes have also doubled. The Gamestop incident itself also inspired a wave of new retail brokerage account openings. The targets for retail investors have increasingly been small to medium cap stocks (unprofitable in many cases), which have outperformed in the past year. So even large cap term fundamental investors can be affected on a relative basis as they watch other market segments outperform their holdings. Investors should keep in perspective that this current trend can change in an instant given a tightening in monetary policy, or a negative feedback loop in asset prices.
據瑞士信貸 (Credit Suisse) 稱，自2020年以來，零售活動在整個交易量中所佔的份額翻了一倍，達到30％，而總體交易量也翻了一倍。 Gamestop事件本身也激發了新的零售經紀賬戶開設熱潮。 散戶投資者的目標越來越多地關注於中小型股票 (在許多情況下無利可圖) ，這些股票在過去一年中表現出色。 因此，即使大盤長期基本投資者也可能在相對的基礎上受到影響，因為他們會發現其他細小市場的表現優於他們所持有的股票。 投資者應保持清醒，如果貨幣政策緊縮或資產價格出現負反饋循環，當前趨勢可能會立即改變。
Twitter post with 175.1k likes
Second, the new investors that jumped into Gamestop and other “meme” stocks are finding that it is dangerous to follow the herd blindly. Social media posts that were shared widely on platforms like Twitter encouraged people to hold onto their shares as a way to hurt the establishment and “stick it to Wall Street.” While some hedge funds did get forced to liquidate their positions and take steep losses, certainly many others were able to cover their shorts, cashed out profitably on the long side, or took new shorts as the stock reached its highs. Mutual fund houses and other institutional investors as well as market makers also made major profits according to reporting from Bloomberg and Reuters. Meanwhile, with most of the trading volume taking place near the peak of the stock price, the majority of retail investors, including those trading on margin, likely got burned.
其次，跳入Gamestop和其他“ 散戶抱團股 ”*註 股票的新投資者發現，盲目跟風是危險的。 在推特之類的平台上廣泛共享的社交媒體帖子鼓勵人們持有其股票，以此企圖傷害機構並“ 傷害華爾街 ”。 儘管一些對沖基金確實被迫清算並蒙受了巨大損失，但當然還有許多其他對沖基金能夠彌補其空頭，在多頭方面套現獲利，或者在股票達到其高點後又重新做空。 根據彭博社和路透社的報導，共同基金公司和其他機構投資者以及做市商也獲得了可觀的利潤。 同時，由於大多數交易量都在股價峰值附近進行，因此大多數散戶投資者，包括以保證金進行交易的散戶，都可能受到重創。
*註: 原文稱為meme，泛指一些缺乏基本面的小型股，但其上套養了一大堆空單； 如AMC、KOSS等。
The misconception was that inflating the market capitalization of stock would be like filling a balloon with money, when the reality is that it’s the marginal trade that sets the value of the whole company and the marginal seller that drives down the price. Another mistake for many was treating the act of trading as a statement of politics or identity, rather than a transaction for the sake of making a profit. To be fair, many retail investors did make significant profits, especially as the original r/wallstreetbets posters did prevail against the original shortsellers of Gamestop.
這裡有一個誤解就是，以為股票的市值是用金錢裝的，像氣球一樣。 而實際上，它是由邊際交易決定了整個公司的價值，且邊際賣方決定了價格 (這表示價格可由少數人操控，而隨時可下挫)。 許多人的另一個錯誤是將交易行為視為政治或身份的陳述，而不是為了謀利而進行的交易。 公平地說，許多散戶投資者確實獲得了可觀的利潤，尤其是原始的r / wallstreetbets發帖者確實勝過了Gamestop的原始賣空者時。
The difference here was between investors doing primary research and making informed bets versus those who were caught up in the emotions of the moment. While more people being able to participate in markets is ultimately a good thing, an introduction to investing need not be so costly even if it is exciting. New participants in markets would be much better off by getting started in a boring way like making regular deposits into broad index funds over long periods of time.
而這裡的區別就在於，一個是進行基本研究以進行明智的下注的投資者，而另一個是被當下的情緒所引導的投資者之間的區別。 雖然更多的人能夠參與市場最終是一件好事，但即使投資令人興奮，進入投資界的學費卻不必那麼昂貴。 新手投資者最好以無聊的方式開始其投資歷程，例如長期 / 定期投入指數型基金等。
***This article reflects the personal views of the author and not any firm’s and should not be viewed as an investment recommendation.***